Is Inflation Transitory? And How Are the Markets Reacting to The Latest Inflation Data?

With US CPI at 5.4% YoY September 2021 (Bureau of Labour Statistics) and world food prices up +32.7% Y0Y September 2021 (United Nations), inflation is looking less and less transitory with financial markets pricing more aggressive central bank hiking cycles (UK OIS pricing 108bp hikes by Bank of England by December 2022, Bloomberg). But the U.S. Federal Reserve still expect PCE inflation (personal consumption expenditure) to be 2.2% or below for 2022, 2023 and 2024 (FOMC summary of economic projections). We investigate the difference between the central banks and the financial markets expectations, and also the impact this will have on asset prices.